A cDNA clone encoding an O-methyltransferase (OMT) from alfalfa has been isolated, which methylates the 2'-hydroxyl of isoliquiritigenin (2',4,4'-trihydroxychalcone) to form 4,4'-dihydroxy-2'-methoxychalcone, the most potent of the nod-gene-inducing flavonoid derivatives released from alfalfa roots. The cDNA clone was identified on the basis of N-terminal sequence identity to purified S-adenosyl-L-methionine:isoliquiritigenin 2'-O-methyltransferase (chalcone OMT) and expression of enzymatically active chalcone OMT protein in Escherichia coli. The deduced amino acid sequence showed significant similarities to other OMTs. Chalcone OMT is encoded by a small gene family in alfalfa and related sequences are present in other legumes. The chalcone OMT gene is expressed primarily in alfalfa roots; transcript levels were highest during the first 2 weeks of development. The OMT transcript was also detected, to a much lesser extent, in root nodules. In contrast, chalcone isomerase (CHI), although expressed at high levels in roots, was found in all plant organs and had a somewhat different developmental expression pattern. Chalcone OMT transcripts were localized primarily to epidermal and cortical cells starting 1.5-2.0 mm behind the root tip, whereas CHI transcripts were present at approximately equal levels in epidermal, cortical and vascular tissues, both at the root tip and throughout the root. Chalcone OMT transcripts were elicitor-inducible in alfalfa cell suspension cultures, although only low levels of methoxychalcone accumulated. The implications of these results for plant-microorganism interactions are discussed.